Surge in Shareholder Activism Indicates Global Trends in Corporate Governance
Shareholder activism has reached new heights in the first half of 2024, witnessing 147 new campaigns globally, marking a 7% increase from the previous year. This surge notably surpasses the five-year average by 29%. The Asia-Pacific region experienced the most significant rise, with a 65% increase in new campaigns, largely driven by Japan's contribution of 28 out of the 43 new campaigns in APAC. Notable cases include Elliott Investment Management's acquisition of stakes in Sumitomo Corp. and SoftBank Group Corp., as well as Oasis Capital's advocacy for changes at Ain Holdings Inc.
In the United States, the number of campaigns escalated from 56 to 62 compared to last year. This surge particularly targeted technology companies. Additionally, the real estate sector experienced heightened activism, whereas financial services showed subdued activity. Europe witnessed a trend termed "swarming," where multiple activists targeted the same company, often due to partnerships between new and established investors.
Key Takeaways
- Global activist campaigns surged to a record high, with 147 new campaigns in H1 2024.
- Asia-Pacific observed a 65% surge in activism, with Japan leading at 28 campaigns.
- The U.S. witnessed a rise in campaigns, with technology companies being frequent targets.
- Europe saw the emergence of "swarming" tactics with multiple activists targeting the same company.
- Activists increasingly prefer private negotiations to secure board seats.
Analysis
The surge in shareholder activism, particularly in the Asia-Pacific and tech sectors, reflects heightened demands for corporate governance reform by investors. The trend, facilitated by strategic partnerships and a preference for private negotiations, suggests a more collaborative approach to influencing corporate decisions. Short-term impacts may include heightened pressure on company boards and potential leadership reshuffling. In the long run, this trend could result in more responsive global corporate governance, although it may also intensify tensions between management and shareholders. Financial markets may experience volatility as these dynamics unfold, impacting the stocks of targeted companies and broader sector indices.
Did You Know?
- Shareholder Activism: Shareholder activism entails actions taken by shareholders to influence a company’s management and operations, often aimed at increasing shareholder value. These actions may include advocating for changes in corporate strategy, leadership, or governance practices. Activists typically acquire a significant stake in a company to gain influence and then use various tactics, such as public campaigns, proxy fights, or private negotiations, to achieve their objectives.
- Universal Proxy Cards: Introduced in the U.S., universal proxy cards streamline the process of electing corporate board members during proxy battles. Shareholders have the option to vote for individual director nominees from both the company's slate and the activist's slate, making proxy fights more inclusive and potentially less adversarial. This innovation encourages private negotiations and settlements.
- Swarming (in Shareholder Activism): "Swarming" involves multiple activist investors targeting the same company simultaneously. This approach exerts significant pressure on a company's management and board, as the combined influence of several activists can be more impactful than that of a single activist. Swarming often occurs due to collaborations between new and established activist investors, aiming to maximize their collective influence over corporate decisions.